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Many health care finance mechanisms transfer health insurance risks to health care providers. Global capitation is the best known example but bundled and episode payments, Diagnosis Related Groups payments, the Medicare/Medicaid Prospective Payment Systems for Physicians, hospitals, nursing homes, and home health agencies, and contractual agreements between health care providers, and other third party payers, also transfer insurance risks.

Calculating actuarially correct health insurance premiums is difficult, while analyzing the impact of transferring insurance risk portfolios to health care providers, once the correct premiums are known, is easy. I use portfolio size adjusted standard errors, to compare how portfolio size affects insurers' financial results, including: Profitability, Operating losses; Insolvency; Surplus requirements, and Maximum sustainable benefits for policyholders/patients to reveal what happens when insurance risks are managed by smaller, less capable insurers, such as risk assuming health care providers. These analyses will reveal multiple flaws in the rationale for capitation financed health care. Capitation, contrary to the assertions of its advocates, must reduce health care (finance) system efficiency and the quality and quantity of patient care.

This paper builds on earlier papers and provides more extensive tables that will better help readers understand the impact of portfolio size on insurer operating performance. These tables show that large insurers, especially insurers with portfolios of 10,000,000 or more have very little likelihood of adverse financial outcomes, while all smaller insurers have very high probabilities of adverse financial outcomes. These tables will help readers and policy makers evaluate the utility of increasing the numbers of competing health insurers vs implementing either a single national health insurer, or perhaps state health insurers.